Indian IT Firms Head to Smaller Towns

By

Dhanya Ann Thoppil And

Rumman Ahmed

Dec. 14, 2012 12:04 a.m. ET

BANGALORE--Indian business outsourcing companies are moving to smaller cities like Indore or Vishakhapatnam, seeking to cut costs at a time when U.S. and European clients are refusing to pay higher fees.

Margins in India's $100 billion outsourcing industry are under pressure. Foreign customers are spending less due to slowing Western economies. Competition from rival outsourcing providers in places like Mexico and the Philippines is...